Frank Richard Ahlgren III, pleaded guilty today to filing a tax return that underreported his capital gains from the sale of bitcoin, according to the U.S. Department of Justice.
Ahlgren, an early bitcoin investor, failed to accurately report his cryptocurrency profits, leading to a significant tax loss to the Internal Revenue Service (IRS).
Ahlgren faces a maximum sentence of three years in prison
Between 2017 and 2019, Ahlgren underreported or did not report the sale of over $4 million worth of bitcoin. In 2015, Ahlgren purchased around 1,366 bitcoins when the cryptocurrency was valued at under $500 each. By October 2017, he sold 640 bitcoins for approximately $3.7 million, using the proceeds to buy a home in Park City, Utah. However, when filing his 2017 tax return, Ahlgren inflated the cost basis of the bitcoins to reduce his capital gain liability.
In addition, Ahlgren sold more than $650,000 worth of bitcoin in 2018 and 2019, but failed to report these transactions on his tax returns for those years. The total tax loss to the IRS due to Ahlgren’s actions exceeded $550,000.
Ahlgren now faces a maximum sentence of three years in prison, along with possible supervised release, restitution, and monetary penalties. His sentencing will be determined by a federal district court judge based on U.S. Sentencing Guidelines.
The case is being investigated by the IRS Criminal Investigation Division and the Texas Office of Attorney General. The Department of Justice’s Tax Division, along with the U.S. Attorney’s Office for the Western District of Texas, are handling the prosecution.
IRS demands that any crypto transaction over $10,000 be reported
U.S. authorities are tightening regulations on cryptocurrency transactions, intensifying their focus on capital gains from Bitcoin and other digital assets. This move follows the rise in cryptocurrency trading and the significant gains often associated with it. Recent amendments to the tax code now require taxpayers to report all crypto transactions, including trades, sales, and even airdrops. The IRS introduced these regulations to close the tax gap resulting from underreported crypto earnings.
For the 2024 tax season, the IRS demands that any crypto transaction over $10,000 be reported, following new rules from the bipartisan infrastructure bill signed into law in 2021. This includes reporting personal details such as the sender’s name, address, and social security number for transactions conducted through crypto exchanges or custodians. This change aims to increase transparency and compliance, as many early adopters of crypto had avoided declaring their substantial profits.
Moreover, crypto owners must now use Form 8949 and Schedule D to record every transaction, calculating gains and losses based on the holding period (short or long-term). This requires accurate records of the cost basis and transaction dates to ensure proper taxation. As IRS scrutiny increases, non-compliance risks steep penalties, including felony charges in extreme cases.
The authorities’ intensified efforts reflect the growing importance of crypto regulation as these assets become more integrated into the broader economy. As a result, investors and traders need to stay updated on their obligations to avoid penalties.
